GBERMIC Chapter 1-5
Chapter 1
Governance
- refers to a process whereby elements in
society wield power, authority and influence
and enact policies and decisions concerning
public life and social upliftment.
- It means the process of decision making
and the process by which decisions are
implemented through the exercise of power
or authority by leaders of the country and or
organizations.
Governance comprises all the process of
governing (6)
- Undertaken by the government of a country
- By a market or by a network
- Over a social system and whether through
the laws
- Norms
- Power of language
Governance can be used in several
contexts (4)
- Corporate governance
- International governance
- National governance
- Local governance
Characteristics of Good Governance (8)
Participation
- It is a characteristic of good governance
whereby men and women are key
cornerstones of good governance.
- It could be either direct or through
legitimate institutions or representatives.
- It needs to be informed and organized.
Accountability
- It is a characteristic of good governance
that
is the key requirement of it.
- It cannot be enforced without transparency
and the rule of law.
Effectiveness and Efficiency
- It is a characteristic of good governance
that processes and institutions produce
results that meet the needs of society while
making the best use of resources at their
disposal.
- This concept context of good governance
also covers the sustainable use of natural
resources and the protection of the
environment.
Equity and Inclusiveness
-It is a characteristic of good governance
that ensures that all its members feel that
they have a stake in it and do not feel
excluded from the mainstream of society.
- This requires all groups, but particularly the
most vulnerable, to have opportunities to
improve or maintain their well-being.
Consensus Oriented (have 1 goal)
- It is a characteristic of good governance
that requires meditation of the different
interests in society to reach a broad
consensus on what is in the best interest of
the whole community and how this can be
achieved.
- It requires a broad and long-term
perspective on what is needed for sustainable
human development and how to achieve the
goals of such development.
- This can only result from an understanding
of the historical, cultural and social contexts
of a given society or community.
Responsiveness
- It is a characteristic of good governance
that institutions and processes try to serve the
needs of all stakeholders within a reasonable
timeframe.
 GBERMIC Chapter 1-5
Transparency
- It is a characteristic of good governance
that means: decisions taken and their
enforcement are done in a manner that
follows rules and regulations.
- It means that information is freely available
and directly accessible to those who will be
affected by such decisions and their
enforcement.
- It means that enough information is
provided and that it is provided in easily and
understandable forms and media.
Rule of Law
- ) It is a characteristic of good governance
that requires fair legal frameworks that are
enforced impartially.
- It also requires full protection of human
rights, particularly those minors.
- requires an independent judiciary and an
impartial and incorruptible force.
Corporate Governance
- Is defined as the system of rules, practices
and processes by which business
corporations are directed and controlled.
- It involves balancing the interests of a
company’s many stakeholders, such as
shareholders, management, customers,
suppliers, financiers, government and the
community.
- It is a topic that has received growing
attention in the public in recent years as
policy makers and others become more
aware of the contribution good governance
makes to financial market stability and
growth.
- It is all about controlling one’s business
and so is relevant, and indeed vital, for all
governments and the community.
- Its purpose is to facilitate effective,
entrepreneurial and prudent management that
can deliver long term success of the
company.
- Its fundamental aim is to enhance
shareholders value and protect the interests
of other stakeholders by improving corporate
performance and accountability.
(Basic) Objectives of Corporate
Governance
1) Fair and Equitable Treatment of
Shareholders
- A corporate governance structure ensures
equitable and fair treatment of all
shareholders of the company.
2) Self-Assessment
- Corporate governance enables firms to
assess their behavior and actions before they
are scrutinized by regulatory agencies.
3) Increase Shareholders' Wealth
- Protect the long-term interests of the
shareholders.
4) Transparency and Full Disclosure
- Ensuring a higher degree of transparency in
an organization by encouraging full
disclosure of transactions in the company
accounts.
Basic Principles of effective corporate
governance. (3)
Transparency and Full Disclosure
- Is the board telling us what is going on?
- Does the board meet the information needs
of investment communities?
- Does it safeguard integrity in financial
reporting?
- Does it make timely and balanced
disclosure?
- Can an outsider meaningfully analyze the
organization’s actions and performance?
 GBERMIC Chapter 1-5
Accountability Chapter 2
- Is the board taking responsibility? BOD (board of directors) and Audit
- Does the board clarify its role and that of Good Corporate Governance committee
management? - based on the principles underpinned by - Oversee the management and are expected
- Does it promote objective, ethical and consensus and continually developing notion to protect the shareholder’s rights.
responsible decision making? of good practice.
- Does it lay solid foundations for Management
management oversight? True or False - It is part of the governance framework.
- Does the composition mix of board There are no absolute rules which must be - It can influence who sits on the board and
membership ensure an appropriate range adopted by all organizations. the audit committee as well as other
and mix of expertise, diversity, knowledge T or F governance controls that might be put in
and added value? Answer: True place.
- Is the organization's senior official There is a simple universal formula for good
committed to widely accepted standards of governance. The shareholders/owners delegates
correct and proper behavior? T or F responsibilities to:
Answer: False - (There is no simple - Board of Directors
Corporate Control formula for good governance) - Executive Management
- Is the board doing the right thing? The essence of any system of good corporate - Operational Management
- Has the board built long-term sustainable governance is to allow the board and - Internal Auditors
growth in shareholders’ value for the management the freedom to drive their
corporation? organization forward and to exercise that Board of Directors, Executive Management,
- Does it create an environment to take risks? freedom within a framework of effective Operational Management, and Internal
- Does it encourage enhanced performance? accountability. Auditors are accountable to:
- Does it recognize and manage risk? T or F - Shareholders/owners
- Does it remunerate fairly and responsibly? Answer: True - External Auditors
- Does it recognize the legitimate interests of - Regulators
stakeholders? Shareholders/owners - Society and Others
- Are conflicts of interest avoided such that - it is where governance starts delegating
the organization’s best interests prevail at all responsibilities.
times?
 GBERMIC Chapter 1-5
Accountabilities do not extend only to the
shareholders.
T or F
Answer: True
Stakeholders
- Companies also have responsibilities to
other stakeholders
- They can be anyone who is influenced,
whether directly or indirectly, by the
actions of a company.
Management and the board
- They have responsibilities to act within the
laws of society and to meet various
requirements of creditors, employees, and
stakeholders.
Board group of stakeholders has an interest
in quality of corporate governance.
Employees and creditors have a vested
interest in the organization and how it is
governed.
Regulators
- Are a response to society’s wishes to
ensure that organizations, in their pursuit of
returns for their owners, act responsibly and
operate in compliance with relevant laws.
Shareholders/owners
- They delegate responsibilities to various
parties within the corporation, they also
require accountability as to how well
resources that have been entrusted to
management and the board have been used.
The owners want accountability on such
things:
- Financial Performance or Financial
Transparency
- Stewardship
- Quality of Internal Control
- Composition of the BOD and the nature
of its activities
Financial Transparency
- Financial statements that are clear with full
disclosure and that reflect the underlying
economics of the company.
Stewardship
- Includes how well the company protects
and manages the resources entrusted to it.
Owners
- They want disclosures from management
that are accurate and objectively verifiable.
Multiple Choice
From a financial reporting perspective, it is
the management’s responsibility to except:
a. Choose which accounting principles best
portray the economic substance of company
transactions
b. Implement a system of internal control
that assures completeness and accuracy in
financial reporting
c. Ensure that the financial statements
contain accurate and complete disclosure
d. Include information on how well
management incentive systems are
aligned with the shareholder’s best
interest.
Shareholders
- Provide effective oversight through the
election of board members,approval of
major initiatives such as buying or selling
stock, and annual reports on management
compensation from the board.
 GBERMIC Chapter 1-5
Board of directors
- The major representative of stockholders
to ensure that the organization is run
according to the organization’s charter and
that there is proper accountability.
Non-Executive or Independent Directors
- The same as the broad role of the entire
BOD
Management
- Operations and accountability.
- Manage the organization effectively;
provide accurate and timely reports to
shareholders and other stakeholders.
Audit Committee of the BOD
- Provide oversight of the internal and
external audit function and the process of
preparing the annual financial statements as
well as public reports on internal control.
Board of Accountancy
- Set accounting standards dictating
underlying financial reporting and auditing
concepts; set the expectations of audit
quality and accounting quality.
Securities and Exchange Commission Code of Corporate Governance for
- Ensure the accuracy and fairness of public publicly listed companies.
reporting of financial and other information - Its goal is to help companies develop and
for public companies sustain an ethical corporate culture and
keep abreast with recent developments in
External Auditors corporate governance.
- Performs audit of company financial
statements to ensure that the statements are Board of Directors
free of material misstatements including - They are required to implement the code
misstatements that may be due to fraud. and make sure that management and
employees comply with the internal policies
Internal Auditors set.
- Perform audits of companies for
compliance with company policies and laws, Implementation and Monitoring
audits to evaluate the efficiency of Compliance
operations, and periodic evaluation and - The real challenge in many companies that
tests of controls. have already developed their Code of
Business
Chapter 3
THE BOARD’S GOVERNANCE
On November 10, 2016 the Securities and RESPONSIBILITIES
Exchange Commission approved the Code
of Corporate Governance for publicly listed Principles 1: The company should be
companies. headed by a competent, working board to
foster the long-term success of the
corporation, and to sustain its
competitiveness and profitability in a
manner consistent with its corporate
objectives and the long-term best interests
of its shareholders.
 GBERMIC Chapter 1-5
Principle 2: The fiduciary roles,
responsibilities and accountabilities of the
Board as provided under the law, the
company’s articles and by-laws, and other
legal pronouncements and guidelines
should be clearly made known to all
directors as well as to stockholders and
other stakeholders.
Principle 3: Board committees should be
set up to the extent possible to support the
effective performance of the Board’s
functions, particularly with respect to audit,
risk management, related part transactions,
and other key corporate governance
concerns, such as nomination and
remuneration.
Principle 4: To show full commitment to
the company, the directors should devote
the time and attention necessary to properly
and effectively perform their duties and
responsibilities, including sufficient time to
be familiar with the corporation’s business.
Principle 5: The Board should endeavor to
exercise objective and independent
judgment on all corporate affairs.
Principle 6: The best measure of the
Board’s effectiveness is through an
assessment process. The Board should
regularly carry out evaluations to appraise
its performance as a body, and assess
whether it possesses the right mix of
backgrounds and competencies.
Principle 7: Members of the Board are
duty-bound to apply high ethical standards,
taking into account the interests of all
stakeholders.
DISCLOSURE AND TRANSPARENCY
Principle 8: The company should establish
corporate disclosure policies and
procedures that are practical and in
accordance with best practices and
regulatory expectations.
Principle 9: The company should establish
standards for the appropriate selection of an
external auditor, and exercise effective
oversight of the same to strengthen the
external auditor’s independence and
enhance audit quality.
Principle 10: The company should ensure
that material and reportable non-financial
and sustainability issues are disclosed.
Principle 11: The company should
maintain a comprehensive and cost-
efficient communication channel for
disseminating relevant information. This
channel is crucial for informed decision-
making by investors, stakeholders and other
interested users.
INTERNAL CONTROL SYSTEM AND
RISK MANAGEMENT FRAMEWORK
Principle 12: To ensure the integrity,
transparency and proper governance in the
conduct of its affairs, the company should
have a strong and effective internal control
system and enterprise risk management
framework.
CULTIVATING A SYNERGY
RELATIONSHIP WITH
SHAREHOLDERS
Principle 13: The company should treat all
shareholders fairly and equitably, and also
recognize, protect and facilitate the exercise
of their rights.
DUTIES TO STAKEHOLDERS
Principle 14: The rights of stakeholders
established by law, by contractual relations
and through voluntary commitments must
 GBERMIC Chapter 1-5
be respected. Where stakeholders’ rights
and/or interests are at stake, stakeholders
should have the opportunity to obtain
prompt effective redress for the violation of
their rights.
Principle 15: A mechanism for employee
participation should be developed to create
a symbiotic environment, realize the
company’s goals and participate in its
corporate governance processes.
Principle 16: The company should be
socially responsible in all its dealings with
the communities where it operates. It
should ensure that its interactions serve its
environment and stakeholders in a positive
and progressive manner that is fully
supportive of its comprehensive and
balances development.
Corporate Governance
- the system of stewardship and control to
guide organizations in fulfilling their long-
term economic, moral, legal and social
obligations towards their stakeholders.
Board of Directors
- the governing body elected by the
stockholders that exercises the corporate
powers of corporation conducts all its
business and controls its properties.
Management
- a group of executives given the authority
by the Board of Directors to implement the
policies it has laid down in the conduct of
business of the corporation.
Independent director
- a person who is independent of
management and the controlling
shareholder, and is free from any business
or other relationship which could, or could
reasonably be perceived to, materially
interfere with his exercise of independent
judgment in carrying out his responsibilities
as a director.
Executive director
- a director who has executive responsibility
of day-to-day operations of a part or the
whole of the organization.
Non-executive director
- a person who has no executive
responsibility and does not perform any
work related to the operations of the
corporation.
Conglomerate
- a group of corporations that has diversified
business activities in varied industries,
whereby the operations of such businesses
are controlled and managed by a parent
corporate entity.
Internal Control
- a process designed and effected by the
board of directors, senior management, and
all levels of personnel to provide reasonable
assurance on the achievement of objectives
through efficient and effective operations;
reliable, complete and timely financial and
management information; and compliance
with applicable laws, regulations, and the
organization’s policies and procedures.
Enterprise Risk Management
- a process, effected by an entity’s Board of
Directors, management and other personnel,
applied in strategy setting and across the
enterprise that is designed to identify
potential events that may affect the entity,
manage risks to be within its risk appetite,
and provide reasonable assurance regarding
the achievement of entity objectives.
 GBERMIC Chapter 1-5
Related Party
- shall cover the company’s subsidiaries, as
well as affiliates and any party, that the
company exerts direct or indirect control
over or that exerts direct or indirect control
over the company.
Related Party Transactions
- a transfer of resources, services or
obligations between a reporting entity and a
related party, regardless of whether a price
is charged.
Stakeholders
- any individual, organization or society at
large who can either affect and/or be
affected by the company’s strategies,
policies, business decisions and operations,
in general.
The Board’s Governance Responsibilities
I. Establishing A Competent Board
Principle 1
The company should be headed by
competent, working board to foster the
long-term success of the corporation, and to
sustain its competitiveness and profitability
in a manner consistent with its corporate
objectives and the long-term best interests
of its shareholders and other stakeholders.
Recommendation 1.1
The Board should be composed of directors
with a collective working knowledge,
experience or expertise that is relevant to
the company’s industry/sector. The Board
should always ensure that it has an
appropriate mix of competitive and
expertise and that its members remain
qualified for their positions individually and
collectively, to enable it to fulfill its roles
and responsibilities and respond to the
needs of the organization based on the
evolving business environment and
strategic direction.
Recommendation 1.2
The Board should be composed of a majority
of non-executive directors who possess the
necessary qualifications to effectively
participate and help secure objective,
independent judgment on corporate affairs
and to substantiate proper checks and
balances.
Recommendation 1.3
The Company should provide in its Board
Charter and Manual on Corporate
Governance a policy on the training of
directors, including an orientation program
for first-time directors and relevant annual
continuing training for all directors.
Recommendation 1.4
The Board should have a policy on board
diversity.
Recommendation 1.5
The Board should ensure that it is assisted in
its duties by a Corporate Secretary, who
should be a separate individual from the
Compliance Officer. The Corporate
Secretary should not be a member of the
Board of Directors and should annually
attend a training on corporate governance.
Recommendation 1.6
The Board should ensure that it is assisted in
its duties by a Compliance Officer, who
should have a rank of Senior Vice-President
or an equivalent position with adequate
stature and authority in the corporation. The
Compliance Officer should not be a
member of the Board of Directors and
should annually attend a training on
corporate governance.
 GBERMIC Chapter 1-5
II. Establishing Clear Roles And
Responsibilities of The Board
Principle 2
The fiduciary roles, responsibilities and
accountabilities of the Board as provided
under the law, the company’s articles and
by-laws and other legal pronouncements
and guidelines should be clearly made
known to all directors as well as to
shareholders and other stakeholders.
Recommendation 2.1
The Board members should act on a fully
informed basis, in good faith, with due
diligence and care, and in the best interest
of the company and all shareholders.
Recommendation 2.2
The Board should oversee the development
of and approve the company’s business
objectives and strategy, and monitor their
implementation, in order to sustain the
company’s long-term viability and strength.
Recommendation 2.3
The Board should be headed by a competent
and qualified Chairperson.
Recommendation 2.4
The Board should be responsible for
ensuring and adopting an effective
succession planning program for directors,
key officers, and management to ensure
growth and a continued increase in the
shareholders’ value.
Recommendation 2.5
The Board should align the remuneration of
key officers and board members with the
long-term interests of the company. In
doing so, it should formulate and adopt a
policy specifying the relationship between
remuneration and performance. Further, no
director should participate in discussions or
deliberations involving his own
remuneration.
Recommendation 2.6
The Board should have and disclose in its
Manual on Corporate Governance a formal
and transparent board nomination and
election policy that should include how it
accepts nominations from minority
shareholders and reviews nominated
candidates.
Recommendation 2.7
The Board should have the overall
responsibility in ensuring that there is a
group-wide policy and system governing
related party transactions (RPTs) and other
unusual or infrequently occurring
transactions, particularly those which pass
certain thresholds of materiality.
Recommendation 2.8
The Board should be primarily responsible
for approving the selection and assessing
the performance of the Management led by
the Chief Executive Officer (CEO), and
control functions led by their respective
heads.
Recommendation 2.9
The Board should establish an effective
performance management framework that
will ensure that the Management, including
the CEO and personnel’s performance is at
par with the standards set by the Board and
Senior Management.
Recommendation 2.10
The Board should oversee that an
appropriate internal control system is in
place, including setting up a mechanism for
 GBERMIC Chapter 1-5
monitoring and managing potential
conflicts of interest of Management, board
members, and shareholders. The Board
should also approve the Internal Audit
Charter.
Recommendation 2.11
The Board should oversee that a sound
enterprise risk management (ERM)
framework is in place to effectively identify,
monitor, assess and manage key business
risks. The risk management framework
should guide the Board in identifying
units/business lines and enterprise-level risk
exposures, as well as the effectiveness of
risk management strategies.
Recommendation 2.12
The Board should have a Board Charter that
formalizes and clearly states its roles,
responsibilities and accountabilities in
carrying out its fiduciary duties. The Board
Charter should serve as a guide to the
directors in the performance of their
functions and should be publicly available
and posted on the company’s website.
III. Establishing Board Committees
Principle 3
Board committees should be set up to the
extent possible to support the effective
performance of the Board’s functions,
particularly with respect to audit, risk
management, related party transactions and
other key corporate governance concerns,
such as nomination and remuneration.
Recommendation 3.1
The Board should establish board
committees that focus on specific board
functions to aid in the optimal performance
of its roles and responsibilities.
Recommendation 3.2
The Board should establish an Audit
Committee to enhance its oversight
capability over the country’s financial
reporting, internal control system, internal
and external audit processes, and
compliance with applicable laws and
regulations.
Recommendation 3.3
The Board should establish a Corporate
Governance Committee that should be
tasked to assist the Board in the
performance of its corporate governance
responsibilities, including the functions that
were formerly assigned to a Nomination
and Remuneration Committee.
Recommendation 3.4
Subject to a corporation’s size, risk profile
and complexity of operations, the Board
should establish a separate Board Risk
Oversight Committee (BROC) that should
be responsible for the oversight of a
company’s Enterprise Risk Management
system to ensure its functionality and
effectiveness.
Recommendation 3.5
Subject to a corporation’s size, risk profile
and complexity of operations, the Board
should establish a Related Party
Transaction (RPT) Committee, which
should be tasked with reviewing all
material related party transactions of the
company and should be composed of at
least three non-executive directors, two of
whom should be independent, including the
Chairman.
Recommendaiton 3.6
All established committees should be
required to have Committee Charters
stating in plain terms their respective
 GBERMIC Chapter 1-5
purposes, memberships, structures,
operations, reporting processes, resources
and other relevant information.
IV. Fostering Commitment
Principle 4
To show full commitment to the company,
the directors should devote the time and
attention necessary to properly and
effectively perform their duties and
responsibilities, including sufficient time to
be familiar with the corporation’s business.
Recommendation 4.1
The directors should attend and actively
participate in all meetings of the Board,
Committees, and Shareholders in person or
through the tele-/videoconferencing,
conducted in accordance with the rules and
regulations of the Commission, except
when justifiable causes, such as illness,
death in the immediate family and serious
accidents, prevent them from doing so.
Recommendation 4.2
The non-executive directors of the Board
should concurrently serve as directors to a
maximum of five publicly listed companies
to ensure that they have sufficient time to
fully prepare for meetings, challenge
Management’s proposals/views, and Recommendation 5.3
oversee the long-term strategy of the The Board’s independent directors should
company. serve for a maximum cumulative term of
nine years. After which, the independent
Recommendation 4.3 director should be perpetually barred from
A director should notify the Board where re-election as such in the same company,
he/she is an incumbent director before but may continue to qualify for nomination
accepting a directorship in another and election as a non-independent director.
company.
Recommendation 5.4
V.Reinforcing Board Independence The positions of the Chairman of the Board
Principle 5 and Chief Executive Officer should be held
The board should endeavor to exercise an by separate individuals and each should
objective and independent judgment on all have clearly defined responsibilities.
corporate affairs.
Recommendation 5.5
Recommendation 5.1 The Board should designate a lead director
The Board should have at least three among the independent directors if the
independent directors, or such number as to Chairman of the Board is not independent,
constitute at least one-third of the members including if the positions of the Chairman
of the Board, whichever is higher. of the Board and Chief Executive Officer
are held by one person.
Recommendation 5.2
The Board should ensure that its independent Recommendation 5.6
directors possess the necessary A director with a material interest in any
qualifications and none of the transaction affecting the corporation should
disqualifications for an independent abstain from taking part in the deliberation
director to hold the position. for the same.
 GBERMIC Chapter 1-5
Recommendation 5.7
The non-executive directors (NEDs) should
have separate periodic meetings with the
external auditor and heads of the internal
audit, compliance and risk functions,
without any executive directors present to
ensure that proper checks and balances are
in place within the corporation. The
meetings should be chaired by the lead
independent director.
VI. Assessing Board Performance
Principle 6
The best measure of the Board’s
effectiveness is through an assessment
process, The Board should regularly carry
out evaluations to appraise its performance
as a body, and assess whether it possesses
the right mix of backgrounds and
competencies.
Recommendation 6.1
The Board should conduct an annual self-
assessment of its performance including the
performance of the Chairman, individual
members and committees. Every three
years, the assessment should be supported
by an external facilitator.
Recommendation 6.2
The Board should have in place a system that
provides, at the minimum, criteria and
process to determine the performance of the
Board, the individual directors, committees
and such system should allow for a
feedback mechanism from the shareholders.
VII. Strengthening Board Ethics
Principle 7
Members of the Board are duty-bound to
apply high ethical standards, taking into
account the interests of all stakeholders.
Recommendation 7.1
The Board should adopt a Code of Business
Conduct and Ethics, which would provide
standards for professional and ethical
behavior, as well as articulate acceptable
and unacceptable conduct and practices in
internal and external dealings.
Recommendation 7.2
The Board should ensure the proper and
efficient implementation and monitoring of
compliance with the Code of Business
Conduct and Ethics and internal policies.
VIII. Disclosure And Transparency
Principle 8
The company should establish corporate
disclosure policies and procedures that are
practical and in accordance with best
practices and regulatory expectations.
Recommendation 8.1
The Board should establish corporate
disclosure policies and procedures to ensure
a comprehensive, accurate, reliable and
timely report to shareholders and other
stakeholders that gives a fair and complete
picture of a company’s financial condition,
results and business operations.
Recommendation 8.2
The Company should have a policy requiring
all directors and officers to disclose/report
to the company any dealings in the
company’s shares within three business
days.
Recommendation 8.3
The Board should fully disclose all relevant
and material information on individual
board members and key executives to
evaluate their experience and qualifications,
and assess any potential conflicts of interest
that might affect their judgment.
 GBERMIC Chapter 1-5
Recommendation 8.4
The company should provide a clear
disclosure of its policies and procedure for
setting Board and executive remuneration,
as well as the level and mix of the same in
the Annual Corporate Governance Report.
Recommendation 8.5
The company should disclose its policies
governing Related Party Transactions
(RPTs) and other unusual or infrequently
occurring transactions in their Manual on
Corporate Governance.
Recommendation 8.6
The company should make a full, fair,
accurate and timely disclosure to the public
of every material fact or event that occurs,
particularly on the acquisition or disposal of
significant assets, which could adversely
affect the viability or the interest of its
shareholders and other stakeholders.
Recommendation 8.7
The company’s corporate governance
policies, programs and procedures should
be contained in its Manual on Corporate
Governance, which should be submitted to
the regulators and posted on the company’s
website.
IX. Strengthening The External Auditor’s
Independence and Improving Audit
Quality
Principle 9
The company should establish standards for
the appropriate selection of an external
auditor, and exercise effective oversight of
the same to strengthen the external
auditor’s independence and enhance audit
quality.
Recommendation 9.1
The Audit Committee should have a robust
process for approving and recommending
the appointment, reappointment, removal,
and fees of the external auditor should be
recommended by the Audit Committee,
approved by the Board and ratified by the
shareholders.
Recommendation 9.2
The Audit Committee Charter includes a
disclosure of its responsibility on assessing
the integrity and independence of the
external auditor.
Recommendation 9.3
The company should disclose the nature of
non-audit services performed by its external
auditor in the Annual Report to deal with
the potential conflict of interest.
Chapter 4
X. Increasing Focus On Non-Financial
and Sustainability Reporting
Principle 10
The company should ensure that the material
and reportable non-financial and
sustainability issues are disclosed.
Recommendation 10.1
The Board should have a clear and focused
policy on the disclosure of non-financial
information, with emphasis on the
management of economic, environmental,
social and governance (EESG) issues of its
business, which underpin sustainability.
XI. Promoting a Comprehensive and
Cost-Effective Access yo Relevant
Information
Principle 11
The company should maintain a
comprehensive and cost-efficient
communication channel for disseminating
relevant information. This channel is
crucial for informed decision-making by
 GBERMIC Chapter 1-5
investors, stakeholders and other interested
users.
Recommendation 11.1
The company should include media and
analysts’ briefings as channels of
communication to ensure the timely and
accurate dissemination of public, material
and relevant information to its shareholders
and other investors.
INTERNAL CONTROL SYSTEM AND
RISK MANAGEMENT FRAMEWORK
XII. Strengthening The Internal Control
System and Enterprise Risk
Management Framework
Principle 12
To ensure integrity, transparency and proper
governance in the conduct of its affairs, the
company should have a strong and effective
internal control systems and enterprise risk
management framework.
Recommendation 12.1
The Company should have an adequate and
effective internal control system and an
enterprise risk management framework in
the conduct of its business, taking into
account its size, risk profile and complexity
of operations.
Recommendation 12.2
The Company should have in place an
independent internal audit function that
provides an independent and objective
assurance, and consulting services designed
to add value and improve the company’s
operations.
Recommendation 12.3
Subject to a company’s size, risk profile and
complexity of operations, it should have a
qualified Chief Audit Executive (CAE)
appointed by the Board.
Recommendation 12.4
Subject to its size, risk profile and
complexity of operations, the company
should have a separate risk management
function to identify, assess and monitor key
risk exposures.
Recommendation 12.5
In managing the company’s Risk
Management System, the company should
have a Chief Risk Officer (CRO), who is
the ultimate champion of Enterprise Risk
Management (ERM) and has adequate
authority, stature, resources and support to
fulfill his/her responsibilities, subject to a
company’s size, risk profile and complexity
of operations.
CULTIVATING A SYNERGIC
RELATIONSHIP WITH
SHAREHOLDERS
XIII. Promoting Shareholder Rights
Principle 13
The company should treat all shareholders
fairly and equitably, and also recognize,
protect and facilitate the exercise of their
rights.
Recommendation 13.1
The Board should ensure that basic
shareholder rights are disclosed in the
Manual on Corporate Governance and on
the company’s website.
Recommendation 13.2
The Board should encourage active
shareholder participation by sending the
Notice of Annual and Special Shareholders’
Meeting with sufficient and relevant
information at least 28 days before the
meeting.
 GBERMIC Chapter 1-5
Recommendation 13.3
The Board should encourage active
shareholder participation by making the
result of the votes taken during the most
recent Annual or Special Shareholders’
Meeting publicly available the next
working day.
Recommendation 13.4
The Board should make available, at the
option of a shareholder, an alternative
dispute mechanism to resolve intra-
corporate disputes in an amicable and
effective manner.
Recommendation 13.5
The Board should establish an Investor
Relations Officer (IRO) to ensure constant
engagement with its shareholders. The IRO
should be present at every shareholders’
meeting.
DUTIES TO STAKEHOLDERS XV. Encouraging Employee’S
Participation
XIV. Respecting Rights of Stakeholders Principle 15
And Effective Redress for Violation of A mechanism for employee participation
Stakeholder’s Rights should be developed to create a symbiotic
Principle 14 environment, realize the company’s goals
The rights of stakeholders established by law, and participate in its corporate governance
by contractual relations and through processes.
voluntary commitments must be respected.
Recommendation 15.1
Recommendation 14.1 The Board should establish policies,
The Board should identify the company’s programs and procedures that encourage
various stakeholders and promote employees to actively participate in the
cooperation between them and the company realization of the company’s goals and in its
in creating wealth, growth and governance.
sustainability.
Recommendation 15.2
Recommendation 14.2 The Board should set the tone and make a
The Board should establish clear policies and stand against corrupt practices by adopting
programs to provide a mechanism on the an anti-corruption policy and program in its
fair treatment and protection of Code of Conduct.
stakeholders.
Recommendation 15.3
Recommendation 14.3 The Board should establish a suitable
The Board should adopt a transparent framework for whistle-blowing that allows
framework and process that allow employees to freely communicate their
stakeholders to communicate with the concerns about illegal or unethical practices,
company and to obtain redress for the without fear of retaliation and to have direct
violation of their rights. access to an independent member of the
 GBERMIC Chapter 1-5
Board or a unit created to handle whistle-
blowing concerns.
XVI. Encouraging Sustainability and
Social Responsibility
Principle 16
The company should be socially responsible
in all its dealings with the communities
where it operates.
Recommendation 16.1
The company should recognize and place an
importance on the interdependence between
business and society, and promote a
mutually beneficial relationship that allows
the company to grow its business while
contributing to the advancement of the
society where it operates.
Chapter 5
Ethics
- is a set of moral principles or values that
govern the actions and decisions of an
individual or group.
Characteristics and Values Associated
with Ethical Behavior (10)
1. Integrity
- Be principles, honorable, upright,
courageous and act on convictions
- do not be two-faced or unscrupulous, or
adopt an end-justifies-the means philosophy
that ignores principle.
2. Honesty
- Be truthful, sincere, forthright,
straightforward, frank, candid
- do not cheat, steal, lie, deceive or act
deviously.
3. Trustworthiness And Promise Keeping
- Be worthy of trust, keep promises, full
commitments, abide by the spirit as well as
the letter of an agreement
- do not interpret agreements in an
unreasonably technical or legalistic manner
in order to rationalize noncompliance or
create excuses and justification for breaking
commitments.
4. Loyalty (Fidelity) and Confidentiality
- be faithful and loyal to family, friends,
employers, client and country
- do not use or disclose information learned
in confidence
- in professional context, safeguard the
influences and conflicts of interest.
5. Fairness and Openness
- Be fair and open-minded, be willing to
admit error and, where appropriate, change
positions and beliefs, demonstrate a
commitment to justice, the equal treatment of
individuals, and tolerance for acceptance of
diversity
- do not overreach or take advantage of
another’s mistakes or diversities.
6. Caring for Others
- Be caring, kind and compassionate; share,
by giving, be of service to others; help those
in need to avoid harming others.
7. Respect for Others
- Demonstrate respect for human dignity,
privacy, and the right to self-determination
of all people; be courteous, prompt and
 GBERMIC Chapter 1-5
decent; provide others with the information
they need to make informed decisions about
their own lives;
- do not patronize, embarrass, or demean.
8. Responsible Citizenship
- Obey just laws; if all law unjust, openly
protest it;
- exercise all democratic rights and
privileged responsibly by participation
(voting and expressing informed views),
social consciousness, and public service
- when in a position of leadership or
authority, openly respect and honor
democratic processes of decision making,
avoid unnecessary secrecy or concealment of
information, and assure that others have all
information they need to make intelligent
choices and exercise their rights.
9. Pursuit Excellence
- Pursue excellence in all matters; in meeting
your personal and professional
responsibilities, be diligent, reliable,
industrious and committed
- perform all task to the best of your ability,
develop and maintain a high degree of
competence, be well informed and well
prepared
- do not be content with mediocrity
- do not “win at any cost”.
10. Accountability
- Be accountable, accept responsibility for
decisions, for foreseeable consequences of
actions and in actions, and for setting an
example of others.
- to safeguard and advance integrity and
reputation of their families, companies,
professions and the government itself.
- an ethically sensitive individual avoids
even the appearance of impropriety, and
takes whatever actions are necessary to
correct or prevent inappropriate conduct of
others.
Why is Ethical Behavior Necessary?
1.For a society to function in an orderly
manner.
2.The need for ethics in society is
sufficiently important that many commonly
held ethical values are incorporated into laws
3.A considerable portion of ethical values of
a society cannot be incorporated into laws
because of the judgmental nature of certain
values (cheating, stealing, deceiving, lying)
and those that deal with many aspects of
principles (integrity, loyalty, pursuit of
excellence) but are important for an orderly
society.
4.Business decisions influence employees,
customers, suppliers and competitors, while
company operations affect communities,
governments and the environment.
Why Do People Act Unethically?
1.The person’s ethical standards are different
from those of society as a whole, or
2.The person chooses to act selfishly
CATEGORIES OF ETHICAL
PRINCIPLES
Principles of Personal Ethics include
 Basic justice, fairness
 Respect for the right of others
 Concern for the right of others
 Concern for the well-being on welfare
of others
 Benevolence, trustworthiness, honesty
 Compliance with the law
Professional Ethics include among others
 Integrity, impartiality, objectivity
 Professional competence
 Confidentiality
 Professional behavior
 GBERMIC Chapter 1-5
 Avoidance of potential or apparent
conflict of interest
Business Ethics include among others
 Fair competition
 Global as well as domestic justice
 Social responsibility
 Concern for environment
The Need For Professional Ethics
All recognized professions have several
common characteristics.
Most important characteristics:
1.a responsibility to serve the public
2.a complex body of knowledge
3.standard of admission to the profession
4.a need for public confidence
CODE OF GOVERNANCE FOR THE
PROFESSION IN THE PHILIPPINES
(E.O. No. 220, June 23, 2003)
This Code is adopted by the PRC and the
42 Professional Regulatory Boards to cover
an environment of good governance in which
all Filipino professionals shall perform their
tasks.
General Principle of Professional Conduct
Professional are required not only to have an
ethical commitment, a personal resolve to act
ethically, but also have both ethical
awareness and ethical competency.
Ethical awareness
- refers to the ability to discern between right
and wrong, while ethical competency
pertains to the ability to engage in sound
moral reasoning and consider carefully of
alternative actions.
Specific Principle of Professional Conduct
1.Service to Others
2.Integrity and Objectivity
3.Professional Competence
4.Solidarity and Teamwork
5.Social and Civic Responsibility
6.Global Competitiveness
7.Equality of All Professions